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2006 Judge Wizmur - Opinions

Judge Judith H Wizmur -- Opinions signed in 2006

Debtors' Chapter 11 plan was confirmed with issue of appropriate cramdown rate of interest for junior mortgagee reserved. In the absence of an efficient market, court determined to use formula approach to calculate appropriate cramdown interest rate. Negligent risk of nonpayment made it appropriate to add a risk factor of only 1% to the national prime rate.

Plaintiff sought a determination that mortgage payments that debtor was required to make pursuant to a property settlement agreement constituted support for purposes of section 523(a)(5) and were nondischargeable. Plaintiff also seeks reimbursement for a tax obligation. The court determined that the PSA identified the mortgage payment as equitable distribution. Plaintiff failed to show intent was in the nature of child support. Plaintiff also could not stand in the shoes of IRS to establish nondischargeability. Debts were dischargeable.

Debtor's former spouse sought a determination that a prepetition order directing the debtor to make certain payments from his 401k gave rise to a constructive trust under New Jersey law. Court determined that state court clearly identified funds as equitable distribution and that a constructive trust was imposed.

A group of shareholders who previously held common stock in Trump Hotels & Casino Resorts, Inc. prior to the confirmation of its reorganization plan, sought to have the court enter an order enforcing the "Record Date" as established by the debtor's confirmed Chapter 11 plan. The movants claimed that they were the claim holders and intended beneficiaries under Class 11 of the debtor's plan. They sought to compel the debtor to make a distribution of cash and warrants to them. The debtor claimed that when the movants sold their shares after the record date and prior to plan distribution, they transferred their right to receive a distribution from the debtor's estate. The court determined that distributions made to DTC, who held in name only on behalf of participant brokers and financial institutions, who in turn held shares on behalf of their customers, the ultimate beneficial holders, were then subject to NASD rules and advisories. Because the movants elected to sell their shares after the record date but prior to the ex-dividend date, the right to the distribution traveled with the shares sold to the new purchaser.

Chapter 7 trustee brought adversary proceeding challenging the secured status of judgment creditor that had levied on debtor's realty prepetition, on ground that creditor failed to comply with the sequence of execution requirements of New Jersey law. Court held that judgment creditor made "good faith" attempt to ascertain location of debtor's personalty within county, as required under New Jersey law for creditor to properly levy upon debtor's realty, so that trustee could not vacate judgment creditor's levy in exercise of his strong-arm powers as hypothetical judicial lien creditor.

The court denied a request for equitable estoppel to force the insurance company to pay the loss payees for their loss. There was no act or inducement to cause the loss payees to do business with the debtor. The extension of a duty of care from an insurance broker to a loss payee, based on principles of foreseeable harm, did not apply.

The court addressed three issues, including whether a judgment lien against the debtor's real property may be avoided under section 522(f) where the underlying debt was incurred as a purchase money security interest, whether the debtor's spouse may avoid a judgment lien even though she does not own real estate, and the extent of avoidance available to the debtors on this record. The court determined that the PMSI judicial lien was avoidable and that the debtor's spouse was entitled to relief pursuant to N.J.S.A. § 2A:16-49.1.

The debtor challenged the interest rate used by the City to calculate the present value of its claim to be paid over the course of the debtor's Chapter 13 plan. The debtor sought to impose the prime rate, plus a risk factor, following the formula approach announced by the U.S. Supreme Court in Till v. SCS Credit Corp., while the City argued that it was entitled to use the 18% statutory interest rate that is associated with its tax sale certificate. The court determined that the Till court has articulated a clear legal standard establishing the interest rate to be used to determine the present value of a claim, sustaining the debtor's objection.

In a Chapter 7 case, a sales repping organization commenced an adversary proceeding seeking a determination that its claim against the debtor for breach of a non-compete clause in an independent contractor's agreement was nondischargeable. The court determined that organization's claims did not fall within the scope of the discharge exception for false representations, false pretenses, or actual fraud, or within the scope of the discharge exception for willful and malicious injury.

The debtor objected to certain entries in the itemization of charges attached to the mortgagee's proof of claim, and also questioned whether she was properly credited for all of the payments that were made on the mortgage. The court sustained the debtor's challenge to the proof of claim.

The debtor moved for an order authorizing the payment and advancement of defense costs on behalf of its directors under a Directors and Officers insurance policy. The court concluded that the policy and its proceeds were property of the debtor's bankruptcy estate, that the debtor's interest in the policy proceeds was subject to the contractual terms of the policy, that the relevant policy provisions required advancement of defense costs, and that authorization of the payment of the directors' defense costs up to $75,000 would not materially impede the debtor's interest in the policy.

A credit union sought relief from the automatic stay and turnover of an automobile that served as collateral for its pre-petition loan to the debtors. The vehicle in question was damaged in a post-petition automobile accident. It was towed to and left at a repair facility. After a lengthy period of time, and following notice to the debtors and to the credit union, the repair facility transferred title to itself and commenced to repair and operate the vehicle. A year later, the debtors stopped making their regular monthly payments on the vehicle to the credit union. The credit union sought to access its collateral to apply its proceeds toward the outstanding loan amount. The repair facility argued that it was the proper unencumbered titleholder to the vehicle. Alternatively, the facility claimed entitlement to a common-law artisan's lien for the repair work that it performed. Because the credit union's perfected security interest had priority over the garage keeper's lien held by the repair facility, and because the repair facility violated the automatic stay when it transferred title to the vehicle, the credit union's motion was granted and the cross motion of the repair facility for retroactive application of the automatic stay was denied. The repair facility was directed to turn over the vehicle to the credit union.

On a motion for reconsideration, the debtor challenged the actions of the mortgagee in continuing with foreclosure proceedings after the abandonment of the debtor's residence by the trustee. The debtor claimed it was a violation of the automatic stay, necessitating actual damages, including costs and attorney's fees, punitive damages, and a vacation of all actions taken in violation of the automatic stay. The debtor failed to establish grounds for reconsideration.

The issue presented in this case is whether the trustee's cause of action against the defendants, arising post-petition and received through a post-petition assignment from the principals of the debtor, "arises in" a case under Title 11, and may therefore be designated as a core proceeding, or whether it is merely "related to" the bankruptcy case, and therefore more properly categorized as a non-core matter. The underlying action was between third parties to the bankruptcy estate. The matter did not pertain to the administration of the bankruptcy estate. Nor did it invoke any substantive rights under Title 11, or qualify as the type of claim that can only be invoked in the context of the bankruptcy case. While the claim did have some connection to the bankruptcy, in that the trustee, if successful, could recover damages from the defendants, the claim was only "related to" the debtor's case and could not be designated as a core proceeding.

Debtor's motion for sanction pursuant to Rule 9011 was denied for failing to comply with the safe harbor rule. Sua sponte sanctions under Rule 9011 were also not available because an order to show cause was not issued. The court recognized that it did have the inherent power to impose sanctions for improper conduct that is abusive to the judicial system, but declined to do so in this case.